Consequences of a Strong Dollar, Globally
The economy of the United States is well on the path of recovery and growth. After the global financial crisis, the American economy has steadily grown, adding more jobs, improving its GDP and also achieving strong manufacturing and industrial progress statistics in the process. Another aspect of this is that the United States currency, the dollar is also gaining strength worldwide against other currencies. This has an impact not just in America but also around the world. The following are some of the consequences of a strong United States dollar around the world in various different regions and countries:
Consequences of a Strong Dollar:
• Other currencies are weakening against a strong dollar. This means that exchange rate of the currencies increases against the dollar. This increases import bills for many countries for energy resources and other imports which use the dollar as their currency.
• In foreign trade, a strong dollar means cheaper raw materials and imports for United States, but the export bills drop in countries whose currencies are dropping against the dollar.
• As the United States becomes stronger economically it becomes more competitive. As the dollar strengthens against other currencies all over the world, it gives the investors a signal that investing in America, which is growing strongly, is a good idea. This means capital investment moves from other countries to the United States which is great news for USA but it can have a negative impact on developing countries which get less investment.
• For some companies and exporters in the United States also a stronger dollar is bad news. This is because many multinational American companies have operations all over the world and a large percentage of their profits come from the global market. The companies that have a large percentage of its profits due from foreign sales will be negatively impacted by the strengthening dollar.
• Also exporters will be impacted because of the strong dollar. Strong dollar means foreign importers of American exports will have to pay more for American imports. This will impact the export industry in America.
• Strong dollar is bad news for economies struggling in 2014 like European countries, China and Japan in 2015.
The dollar is the currency of the world today. There is a weak demand in the global economy and many countries have economic problems in 2015. A strong dollar and a weak global economy is a difficult combination for many economies all over the world today.